Monday, 19 June 2017

What’s next? – GOLD, OIL 19.06.17

Gold futures were lower in Asian trading on Monday, with market players looking ahead a series of speeches from Federal Reserve officials later this week.

On the Comex division of the New York Mercantile Exchange, gold for June delivery was trading up by 0.26 percent at $1253.20 a troy ounce as of 06:20 GMT.

The yellow metal was able to settle slightly higher on Friday, but remained in the negative side on weekly basis due to a new rate hike from the Federal Reserve. Bullion ended nearly 1.2 percent down for the week.

Last week, the US regulator rose by 25 basis points its short term interest rate to a range between 1.00 and 1.25 percent, marking the second rate move this year. The Federal Open Market Committee also said a third hike is yet to come, rising speculation for September or December as possible target dates for a new increase.

While the Fed clearly chose a hawkish stance on monetary policy, investors remained doubtful over the Fed’s plan to extend its normalization process in the light of weak economic data.

Ahead this week, market participants will be paying attention to speeches from FOMC officials, as well as new economic reports, including existing and new home sales for May and preliminary readings on the manufacturing and services PMI indexes.

OIL

Oil futures moved lower in Asian hours on Monday, extending losses as concerns over an ongoing supply glut continued to weigh on market sentiment.

The US benchmark West Texas Intermediate oil futures traded at $44.82 a barrel, down 0.33 percent from its prior close. Meanwhile, the London-based Brent crude oil futures eased 0.32 percent to trade at $47.22 a barrel as of 05:40 GMT.

Oil benchmarks settled with a moderate gain on Friday, although the week closed in red territory due to increasing doubts on whether OPEC-led output cuts would be able to counteract the global supply overhang and push prices lower in the near term.

Oilfield service provider Baker Hughes said on Friday the number of oil rigs operating the United States moved to 747, adding 6 units in the week ended June 16. This figures clearly show no intention from US producers to reduce output anytime soon.

Baker Hughes data came after a disappointing stockpiles report from the US Energy Information Administration. The latest report showed that crude inventories dropped by 1.66 million barrels in the week ended June 9, below expectations for a 2.7 million-barrel draw.

Last month, OPEC members and a group of independent producers led by Russia agreed to keep lower production levels until March 2018, cutting 1.8 million bpd from global output. The extension of this deal hasn’t shown any positive effect on oil prices so far.

Ahead this week, fresh inventory data from the American Petroleum Institute on Tuesday, followed by EIA’s report a day later. Baker Hughes is due on Friday.